Thought experiment. What would you do in my situation?

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Thought experiment. What would you do in my situation?

Joseph Hennis
Fairfield, CA · Member since 2017 · 98 posts · 84 votes

I'm new to bigger pockets and would like advice on what steps I should take next. I am a new engineer making 76k/yr start. My wife is a psych tech making 45k/yr. Credit score 800.

We started out with our first purchase in April of 2009, buying a home for 150k now valued at 362k. In 2012 that property became a rental. Later, I got a HELOC on that property, and used it as down payment for the other four properties we own. I guess I was doing BRRR without knowing what that was.

So, what I want to know is, what would you do in my situation? What strategy would you use? How would you employ that strategy specific to my scenario?

Any answer is fine; from taking the money out and hiding it in gold bars to selling everything and flipping MF/SFR to wholesaling, etc. Whatever is your specialty.

Would you sell properties, refinance them? If you would refinance, what type of loan would you use and what interest rate would you shoot for?

Assume current market conditions. I am hoping that this thread can be fun, while spawning some new and interesting ideas, as well as help to inform me of the array of investment strategies out there. I have been considering whether I should mention my experience, skills, and training, as it is relevant to what "I" would do... but this discussion is "What YOU would do". So I will leave that out. The following is my actual situation...

property 1 (SFR, CA) rent: 1850 value: 362k loan: 113k payment: 850 rate: 4.375% 30yr fixed HELOC: 73k payment: 500 rate: 4.75%

property 2 (SFR, Utah) rent: 975 value: 150k loan: 58k payment: 450 rate: 4.8% 30yr fixed

property 3 (duplex, Utah) rent: 1050 value: 150k loan: 67.5k payment: 500 rate: 4.875% 30yr fixed

property 4 (duplex, Utah) rent: 1050 value: 150k loan: 67.5k payment: 500 rate: 4.875% 30yr fixed

property 5 (SFR, CA, Primary residence, parents renting) rent: 2200 value: 395k loan: 301k payment: 1900 rate: 4.5% 7/1 arm

total assets: 1.207 million total liabilities: 680k net worth: 527k

total rent: 7125 total payments: 4700 difference: 2425

total cash: 30k

own cars cash. no other rent/mort payment, credit cards paid to 0 balance every month... So, no consumer debt.

THANKS AND HAVE FUN WITH THIS!

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Ryan E.
Investor · Salt Lake City, UT · Member since 2016 · 287 posts · 270 votes
9y

Of course it all depends on what the end goal is. In your situation I don't think I would sell anything off... unless you have a problem child in your portfolio then now may be a perfect time to sell since the market is so hot. 

I know in UT there are credit unions that will give HELOC's on rental properties up to 80% of the appraised value. I would pull HELOC's on as many as I could to at least have access to that money. Or possibly even a business line if credit. Then I'd look at wholesaling/flipping...start marketing for properties and turn the HELOC money fast on flips. This way I could build as much capital as possible to then reinvest in rentals. In this scenario I may even consider switching to a purely capital building mode as many if not most think we are at or close to the top of the market.

Perfect opportunity to expand knowledge and skills into other areas of real estate investing! One of my goals is to learn and implement the creative real estate strategies like owner financing which I think can help anyone be a better wholesaler/flipper/buy and holder. 

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  • Ryan E.
    Investor · Salt Lake City, UT · Member since 2016 · 287 posts · 270 votes
    9y

    Of course it all depends on what the end goal is. In your situation I don't think I would sell anything off... unless you have a problem child in your portfolio then now may be a perfect time to sell since the market is so hot. 

    I know in UT there are credit unions that will give HELOC's on rental properties up to 80% of the appraised value. I would pull HELOC's on as many as I could to at least have access to that money. Or possibly even a business line if credit. Then I'd look at wholesaling/flipping...start marketing for properties and turn the HELOC money fast on flips. This way I could build as much capital as possible to then reinvest in rentals. In this scenario I may even consider switching to a purely capital building mode as many if not most think we are at or close to the top of the market.

    Perfect opportunity to expand knowledge and skills into other areas of real estate investing! One of my goals is to learn and implement the creative real estate strategies like owner financing which I think can help anyone be a better wholesaler/flipper/buy and holder. 

    3Reply
  • Thomas S.
    Member since 2016 · 13k+ posts · 12k+ votes
    9y

    For myself when assessing all your properties I see them all as underperforming. Best guess is long term they are all negative cash flow based on rent to value being too low. Expenses at the end of the road will eat you up. Additional your equity is costing you $2200/month in lost income based on a opportunity value of 10% (assuming present mortgages at 5%). This translates into $225/month surplus to cover expenses on all properties. To say you are in negative cash flow territory is a understatement from my perspective.

    Personally I would sell them all and reinvest in better vehicle asap.

    3Reply
  • Joseph Hennis
    OP
    Fairfield, CA · Member since 2017 · 98 posts · 84 votes
    9y

    @Thomas S. 

    When you say my properties are under performing, you mean cash flow wise, correct? If that is the case, I would agree with you. These are not cash cows. I just spent an hour on my Quickbooks trying to figure out an easy way to show my cash flow. Just way too complicated. Anyone know better software for real estate analysis?

    What I can tell you, is that the only year I've had negative cash flow was this year. Since 2012, my real estate funds account has grown... very slowly. Maybe 2-5k/yr. I also have 7-11k/yr income on my P&L. That area isn't where I've been really successful. You may be right that in a down economy, my low cash flows may make me vulnerable. I've kind of been copying my half-sister's dad's investment strategy, except he was even more negative cash flow with 10 year loans. 35 years ago he had 0 properties. Now he has 120 units with no debt (retired now just living off the cash flow). Not get rich quick, just buy them slowly and pay them all off over time, but he definitely had to fund his investments with cash from his job as an airline pilot.

    I started with 20k invested (down payment and closing costs) in my first property. It didn't need any repairs, was a foreclosure that was priced too high and I lowballed an offer. Since they were priced too high I was the only offer for 6 months. I used that property's HELOC to buy the other 4 properties, plus invested 30k of my own cash. From 50k cash invested, now I have 500k in equity just due to appreciation and paying down loans. That over 900% total ROI and an annualized ROI of 37% for 7 years. I really don't have any better investment vehicle than that. These are good returns from my perspective. If you can get better returns than that, I would definitely love to hear about it!

    I've been considering selling one of my properties, but to pay down debt and reduce debt service. One of the options on the table. 

    Instead, you would reinvest in a better vehicle? What would you have in mind?

    Also, thank you for your candor and honesty! I need every perspective.

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  • Joseph Hennis
    OP
    Fairfield, CA · Member since 2017 · 98 posts · 84 votes
    9y

    @Ryan E. Regarding your HELOC idea, I like it! I could probably get 250k out that way,,, If I could convince my wife, lol. It's too creative of financing (HAHA)... But joking aside, she is on board with whatever I think is best. She just worries and I appreciate the conservative perspective.

    The buy and hold strategy was great when the market was going down. Now that the market is so hot I could flip a few properties to earn additional capital. Maybe use it to pay down some of my loans and/or continue to bigger investments.

    You mentioned switching to a purely capital building mode. What do you have in mind?

    0Reply
  • Ryan E.
    Investor · Salt Lake City, UT · Member since 2016 · 287 posts · 270 votes
    9y

    I just mean using the money from your HELOC(s) to flip and/or possibly start wholesaling to build capital. If you can partner with someone on a flip it will mitigate the risk by at least half! I would argue you can reduce it even further by partnering with someone who has experience and who has flipped successfuly. That might help your wife a little more.

    I used my HELOC to go 25% in on a flip with two other friends. One buddy did 25% and our other friend, who flips full time, went in 50%....he found and managed the entire project. Should be hitting the market in the next week or two and I'm looking at making a great return for a relatively small amount of risk. Especially considering it was completely passive for me.

    Some people are comfortable using a HELOC for buy and hold but I like the idea of flipping better because I am turning my money faster and can pay back the HELOC in just a few months so in my view the money is at risk for a short time. I plan on jumping on as many flips as possible with this friend and build my capital to do more flips and then invest in buy and hold when I feel the time is right or when I find a deal I can't pass up.

    1Reply
  • Andrew Dean
    Rental Property Investor · Utah County, UT · Member since 2016 · 55 posts · 47 votes
    9y

    @Joseph Hennis

    Hi Joseph!  Thanks for the post and for having the courage to post your portfolio.  I am impressed with what you have done so far.  With that said, it sounds like you and your wife fall more on the conservative side of investing, which is great and if you are in it for the long haul, you will have great success financially.  There is nothing wrong with buying properties, paying them down and holding onto them long term, if that is your strategy.  

    However, I am much more aggressive and would have to agree with @Ryan E. on this one. Getting a HELOC on some of that equity would be a great vehicle to obtaining additional properties that cash flow better. I know there are credit unions/banks that will give you up to 100% on non-owner occupied properties, which is great if you want to pull as much out.

    Looking at a few of those returns, I would seriously consider doing a 1031 exchange on all of your properties in Utah and finding something better.  With how things have appreciated and how high rents are, those numbers don't look that great.  There are so many great deals, even with how hot this market is right now.  

    1Reply
  • Joseph Hennis
    OP
    Fairfield, CA · Member since 2017 · 98 posts · 84 votes
    9y

    @Andrew Dean Hi Andrew, I kinda waffled on posting my portfolio for a while. It is a bit... exposing. But honestly I'm not really sure what to do at this point. I feel I should be expanding somehow, but which way to go? There are so many options.

    So it looks like your suggestion would be to use HELOC not necessarily to flip, but to look for better cash flows. (There are HELOCs with 100% LTV?!?) Better yet, do a 1031 exchange into a better cash flowing property. What type of properties would you suggest I look at for better cash flows?

    Thanks for responding! I really appreciate the advice!

    0Reply
  • Joseph Hennis
    OP
    Fairfield, CA · Member since 2017 · 98 posts · 84 votes
    9y

    What I think I am hearing from everyone so far, is the rent to value ratio is low, right? When I bought them, they were much better rent to value, but since they have appreciated, the rent to value ratio kinda stinks. The problem here is that I have under utilized equity just sitting there. Is that the jist of it?

    1Reply
  • Joseph Hennis
    OP
    Fairfield, CA · Member since 2017 · 98 posts · 84 votes
    9y

    @Ryan E. That is great you have a friend who has a lot of experience flipping. I really like this idea. In a hot market it makes a lot of sense to invest for capital gains. I have a couple friends who want to do a flip. At first I was against the idea of investing with partners... Too much complication. But the more I thought about it, I realized it was a smart idea to reduce risk. Still, it's a good idea to be choosy in your choice of partner(s). I've been calling a friend of mine who I know has done a few flips. What I would really like though, is to know someone who flips full time or at least has quite a lot of experience to partner with. Where could I meet someone like that?

    0Reply
  • Michael Lee
    Investor · Coppell, TX · Member since 2008 · 2k+ posts · 646 votes
    9y

    Hello and welcome to BP!  It depends on how to do to make you feel good.  As far as what I am thinking is a couple different things.  One option is to sell because it tends to be a seller's market and you would the best sales price. The second option would be to take advantage of these low interest rate that are available right now.  As long as you are getting a positive cash flow that you think is high enough to please you.  There is nothing with debt that puts money in your pocket.  If you both like your jobs and they let you do part time investing and your thoughts are long term debt i would work on having multiple projects that provide positive cash flow to your liking I would be happy and acquire more debt at lower interest rates.  As long as you care about them being long term investments that are having positive cash flow I would hold on and pay down existing debt with any excessive cash.

    Good luck to you!

    0Reply
  • Ryan E.
    Investor · Salt Lake City, UT · Member since 2016 · 287 posts · 270 votes
    9y

    @Joseph Hennis I am wondering what you purchased your properties for? To me it looks like you've done extremely well and have increased your net worth very significantly. Please keep in mind that I am no expert and still very much new to real estate investing but I feel like the appreciation you've seen on your properties and the rent growth need to be factored in to the equation. I mean look at some of the guys on BP who purchased a home in San Fran back in 2010-2012. Values and rents have both gone way up.

    Also, which city are your UT properties in? Unless they are in Ogden or in a rural town I feel like your values could be low. I know in the Salt Lake valley you'd be pretty hard pressed to find a duplex for 150k right now. Salt Lake, UT, Davis, Weber counties are all very strong markets with very strong population growth. In 2016 Utah was #1 in the nation for pop growth by percentage with 2%. Utah also has really low unemployment (I think we are around 3%), and is consistently ranked in the top for best state for businesses. On top of that we have one of the youngest populations of any state because of the interesting dynamic we have here with the LDS church/population. All of that should be factored in to whether you decide to sell or keep your properties. 

    As far as where to find a partner to flip with or someone who is flipping full time I would just say the usual suspects....the local real estate investor associations and networking as much as possible. Any realtors you know probably know flippers, your friend who has done them in the past might know other guys/gals, if you know any reputable wholesalers they probably know who the good flippers are and can point you in the right direction. If you can find someone who needs capital but knows how to find the deals and get the work done and you provide the capital then you could have a good partnership. 

    0Reply
  • Rebecca Belnap
    Rental Property Investor · Lehi, UT · Member since 2015 · 195 posts · 133 votes
    9y

    @Ryan E. is right.  Utah is a big place and unless you have properties in Vernal, ogden or somewhere rural, I can't imagine finding a duplex right now for less than $200,000 unless it is unlivable.  I would also recommend HELOCs up to 80% of the values.  Make sure you are getting the maximum rent you can so they still cash flow.

    Once you have the Helocs, you could buy more small units or move to something bigger.  I would think you would have 20% down on a 20 plex.  There are less buyers for them, so you often get better cash flows, but run the numbers.  Look at at least a dozen since you appear to be someone who is comfortable with long distance investments, you can look anywhere.  Don't forget to take into account cap exp, since a lot of times they are selling because they know something is about to break.

    Good luck.

    0Reply
  • Andrew Dean
    Rental Property Investor · Utah County, UT · Member since 2016 · 55 posts · 47 votes
    9y

    @Joseph Hennis I sent you a PM last night that pretty much echos what @Ryan E. just said.  Just looking at those numbers for your Utah properties makes me wonder where they are, as the multi-family properties I'm looking at are all over $300k now.  I'm very curious to know where those properties are located as well.  

    To answer your question, if I were you, I would look for duplexes, triplexes or fourplexes that cash flow better. Since you are a virtual investor, I wouldn't buy a property that needs to be fixed up, but one that is more or less turnkey. Mountain America Credit Union has a loan product that loans up to 90% LTV for any property up to $480k. So you if you find a nice updated fourplex that, say, rents out for $900/$1000 each and sells for $475k, then that would be a better investment, in my opinion. And all you would need is around $50k down. Of course, there are hundreds of other factors involved, but that is just an example of the numbers that I would be looking for if I were you. I wouldn't recommend jumping into anything bigger than a 10plex just yet. Those can be a lot more work and you may want to get some experience with a few 4plexes first. But you may be the super motivated investor that just wants to go for it, so more power to you if that's the case! I would also find a realtor that is connected in the Utah investor market that could walk you through a lot of it. Having someone on your side that has a current pulse of the market is priceless.

    As far as flipping is concerned, since you are remote, it'd be more ideal for you to be a money partner and not involved.  There are quite a bit of flippers that look for money partners, but I would do my due diligence and find out how many flips they've been a part of. I wouldn't partner with anyone that is green and hasn't cut their teeth on real estate investing yet.   

    I'm not a seasoned investor as I have only been doing this for about 4 years (yet to invest during a recession), but nevertheless, as you stated above, this is what I would do in your shoes. 

    2Reply
  • Charles Doehler
    Real Estate Agent · Ogden, UT · Member since 2016 · 20 posts · 7 votes
    9y

    Either increase rent by 15% or turn them before the fall.  Cash flow will not support pre-sell rehab in the long run.  Longer you wait, more rehab.  Other strategy is make a 8 year plan.  Live 2 years in each before selling while renting the others.  Take the equity from the sales and invest in used cars.

    1Reply
  • Account Closed
    Greensboro, NC · Member since 2016 · 45 posts · 20 votes
    9y
    Joseph Hennis It sounds like you need to get your arms around tracking the performance of each property from a net income / cash flow perspective. As you mentioned some struggles with Quickbooks you could spend a few dollars for a bookkeeper/CPA (with real estate experience) to help get your numbers in order. After assessing the performance of each property, you should be able to then identify areas for improvement of cash flow for each investment. Go line by line on each property's P&L and challenge every number; attempting to raise rents and lower expenses for every line item. If a single property does not cash flow to a certain level (your bar to set), then sell the property and apply the equity in a more profitable investment. Aside from the struggles of the accounting system, you can easily establish separate checking accounts for each property. If you have not already done so, the separate checking accounts provide a clear delineation of all revenue and expenses for each property. Your bank statements then provide a quick and easy way to gauge net cash flow by property. My apologies if this is not on target. Congratulations on building a portfolio and best of luck!
    1Reply
  • Sam Newell
    Real Estate Agent · Lehi, UT · Member since 2016 · 136 posts · 91 votes
    9y

    @Joseph Hennis First of all Congrats!!!!! You are so far ahead of the game than most.  Great income, credit, and investments.

    Cash flow is not always as important as some say, it really depends on your personal situation.  Personally I am not investing because I need the cashflow now, I'm investing in rentals because I want to own 50 doors and have them paid off.  Cash flow is important and I never recommend buying negative cash flow units but I also look at more than just cash flow like age, condition, cap rate, and potential equity gains.  

    You can probably raise your rents, most landlords don't raise rents nearly enough to keep up with the market.

    I would only sell if you have a really good opportunity to buy another long term hold property or if you have one that is just getting too old and run down. (I sell new fourplexes that are very hard to beat)

    I just sold an older duplex and am buying a brand new fourplex and a triplex from FIG (Fourplex Investment Group), I work with FIG and haven't found better rental property opportunities in any of the cities/states where we build.

    I'm an experience agent here in Utah and I've seen a ton of excited young investors get into flipping.  While flipping can be fantastic I usually see people who under estimate the time, money, and work that goes into doing a successful fix and flip.  So do your homework and plan on more than what it looks like initially.

    I have flipped two properties and now have decided that I'd rather focus on my day job and buy long term rentals, my back and knees also don't make me want to do the physical labor anymore either lol.

    I also house hack every year.  I buy a  new rental and move into it with 5% down.  My goal is to buy as many properties as possible at at least a 6% cap rate while interest rates are low.

    As soon as I can I will be getting a commercial line of credit from my local credit union based on the equity in my rentals and will start buying more as soon as possible.

    Good luck!

    3Reply
  • Joseph Hennis
    OP
    Fairfield, CA · Member since 2017 · 98 posts · 84 votes
    9y

    @Michael Lee That's another strategy I was considering... I could just keep going the way I have been... Slowly.. I have income from my job that I could invest and not worry about the properties. They can be maintained at current mortgage payment and rent indefinitely. I feel like it isn't aggressive enough though. I have all this capital potential that could be utilized.

    Thanks for your post!

    0Reply
  • Joseph Hennis
    OP
    Fairfield, CA · Member since 2017 · 98 posts · 84 votes
    9y

    @Ryan E. I left out purchase price because I am not so much trying to analyze what I did in the past as I am trying to analyze what to do in the future. I have two conflicting thoughts in this regard... One is "If you are doing something right... Keep doing it!". It's good advice, especially when someone is jumping around a lot instead of focusing on what works. I have done a few different businesses before finding this one, and I like it... a lot... The other conflicting thought I have is "The way I made my first half million isn't going to be the way I make the second half million." Markets change. The strategy I used before is becoming less and less effective in this market. I have to find more obscure markets across the country to find properties with decent cashflow and those will not have much appreciation.

    That being said, here are some numbers and locations for ya.
    suisun city CA 150k, 5k closing costs 4/2 1890 sq ft, bought 4009, current value 362k

    ogden UT 77k, 4k closing costs 4/2 2000+ sq ft. bought 2013, current value 150k

    ogden UT 93k, 4k closing costs duplex (I think 2/1's, I would have to go look to be sure) bought 2014, current value 150k (this one is harder to figure out the value, maybe 130k-170k)

    ogden UT 93k, 4k closing costs duplex (these were actually side by side duplicate properties) bought 2014, value 150k, same as above...

    fairfield CA 343k 5k closing costs (my own home... not really relevant but since my dad is paying rent... kind of consider it an investment. plus there is equity I could tap...) bought 2015, current value 395k (this is california, rising as we speak! lol)

    I put 10% down on first one, 20k ish to close (less actually) The other four I bought with HELOC money as down payment with a little of my own. With repairs (I put 15k into my own home, wife wanted a better kitchen) I have spent about 50k total. None of these properties needed any repairs but we have done some. All were rent ready. The 3 ogden properties were already rented, 850/mo for the SFR, 525/mo/unit for the duplexes (1050 per house). Rent to price ratio around 1.2% so a bit over the 1% rule of thumb.

    I am wondering actually why ogden is so cheap compared to the rest of utah? 45 min drive to salt lake city seems like a breeze and more people would want to live there. Commutes are 1 hr+ in the bay area, What do you think the likelihood of that changing in the future and Ogden becoming a higher valued area?

    1Reply
  • Rodney Sums
    Laveen, AZ · Member since 2016 · 584 posts · 528 votes
    9y

    @Joseph 

    @Joseph Hennisundefined: are you planning to sell property 5 before the rate adjusts?  unless you're being nice to your parents, seems a shame to have 100k in equity (before COS)

     plus be in debt 300k  to get 300/month before expenses.  you could be 300k in debt on a multiplex 

    Do the numbers reflected in your cash flows reflect property management fees (if applicable) hoa fees (same thing) and all other expenses related to holding properties?

    (btw I'm no expert, new to the game and learning like you.  just my thoughts after reading)

    @Ryan E. Please share your calculations for why Joseph's properties are not performing well enough for him to hold, it would be a great learning experience.

    0Reply
  • Andy D.
    Investor · Zürich, Zürich · Member since 2016 · 292 posts · 115 votes
    9y

    @Joseph Hennis I think it has become clear in this thread that the majority of people is pro "moving quicker". The main reason is pure logic related to fact: the interest rates will rise. The market will, in turn, take a slight hit as regards speed of continued growth. I'm not saying it will crash but it will slow down a bit. So loans are "cheap" (comparatively).

    At the same time the equity you have is not doing you any good. As @Thomas S. has pointed out it costs you money, effectively. While I don't see the big issue with your rent numbers (all depends on the individual situation of all people involved there) I would definitely pull out as much money from the units as is feasible with respect to a still ok LTV (don't overleverage; rents still need to support all costs) and then use the money to make use of the current interest rates by getting mortgages, meaning of course: buying something. What that something is is completely dependent on what you want to deal with. And obviously on the market/availability. Those are my five cents.

    0Reply
  • Joseph Hennis
    OP
    Fairfield, CA · Member since 2017 · 98 posts · 84 votes
    9y

    @Rebecca Belnap That's a good idea. I could buy a larger MFR with the capital. One thing I like about our duplexes, they are ALWAYS rented. Literally. Not even 1 week/yr of vacancy. There is always someone lined up ready to move in as soon as the other people move out. For this reason alone my wife was suggesting we go this route.

    And yes, I am fairly comfortable buying out of area. In fact the properties in Utah I bought site unseen. I still haven't seen them, lol. When my mom visited my sister who lives in Utah last year, she just had to go see them. Guess she didn't think they were real, haha.

    I get enough pictures to get an idea of what it looks like. I have contractors, property inspectors, and property managers tell me about the property's condition and rent-ability. I would recommend purchasing through a property manager as opposed to a retail real estate agent. The property manager is going to have to manage the property they sell you, so they have some skin in the game. I have had property managers tell me they wouldn't manage in certain bad parts of town, or the property is a dump, best to pass on this deal... A real estate agent generally just wants to make the sale and in most cases doesn't know much about investment properties.

    That's a good point about cap ex. One of the duplexes needed a new roof. I knew that before I bought it. They just replaced it too, but didn't put the right kind of moisture barrier underneath for Utah. The snow and ice caused water to wick up under the tile (don't ask me how this works, I'm from california!) This extra expense (finally paid it this year) caused me to negative cash flow for the first time this year

    Something I've been thinking about with regards to Cap Ex.,, Maybe it makes more sense to finance Cap Ex. The monthly debt service may rise, but that can sometimes be offset by increased rents (especially if the Cap EX was something that increased the rent, like a new kitchen/bath). Rents have increased in two of my properties, ogden SFR and suisun SFR, 850/mo to 1100/mo and 1600/mo to 1850/mo. I am pretty sure if I remodel the kitchen in suisun I could get 2200/mo. So if I spend 15k on the kitchen and get 350/mo more, thats not a bad IRR (at least for me). So Cap Ex could be seen as an opportunity in some cases.

    0Reply
  • Joseph Hennis
    OP
    Fairfield, CA · Member since 2017 · 98 posts · 84 votes
    9y

    @Andrew Dean Thanks Andrew! I have thought about 4-6plexes as my next step. I wouldn't want to go any bigger just yet. I do like how easy it is to fill vacancies with plexes.

    For me, a $475k four plex at $1k/mo per unit wouldn't meet the minimum 1%, so I might look for a different area. I do know people invest in this level, and if the down payment is right the property will cash flow. Generally more appreciation in that range as well. I guess this fits the B class MFR type?

    0Reply
  • Joseph Hennis
    OP
    Fairfield, CA · Member since 2017 · 98 posts · 84 votes
    9y

    @Charles Doehler Investing in used cars? This is definitely a more unique approach. I'd love to hear more of this strategy! =) My friend does car flipping and loves it.

    There's no wrong answer in this thread. I asked what you would do in my shoes!

    1Reply
  • Joseph Hennis
    OP
    Fairfield, CA · Member since 2017 · 98 posts · 84 votes
    9y

    @Account Closed I have been tracking P&L only in quickbooks. It's a pain to get the cash flow out of quickbooks, though you can get the statement of cash flows and fudge around with it to get the numbers. Just isn't instantaneous like the P&L. Seems quickbooks was made more for taxes and businesses.

    I like the idea of getting a better bookkeeper. I have one, but she seems better acquainted with businesses than real estate. I had to argue with her that painting is directly expense-able and does not need to be depreciated. Also, when I bought more properties, she seemed concerned, and advised me not to buy anymore properties lest my tax preparation fee become too high. LOL. I hope to one day spend a fortune on tax preparation, with a huge portfolio to match.

    If I had a bookkeeper with more real estate savvy, I could get help tracking returns and cash flows. I haven't really needed that yet. I have no outside investors I need to show my numbers to. But occasionally I do pull out all my numbers and play around with my financial calculator to figure out my rate of return and cash flow. It would be nice to have that information handy at a moments notice.

    I might take you up on having separate checking accounts... I hadn't even considered this until you mentioned it. If I had LLCs I might have to do this anyway. It might be good to start now. I could probably tie the accounts together too (so that if the balance is short in one account it pulls from another) to keep from going negative in one account or another. My cash balance fluctuates 5k/mo. This would make it super easy to tell which property needs more attention to increase cash flow.

    So, you what would you do in my shoes, investing wise? Just continue holding?

    0Reply
  • Joseph Hennis
    OP
    Fairfield, CA · Member since 2017 · 98 posts · 84 votes
    9y

    @Sam Newell I have a similar long term goal. I want to own 50-100 units eventually. Raising rents is tough. Every time I try, I am met with angry tenants. =) It's easiest for me to just raise rents when they move out. But... I do use property managers so maybe I should put a little pressure on them this year to get that rent up.

    I understand what you mean about flipping being tough on the body. I got out of construction work for just that reason. I might partner with someone who is an experienced flipper. Hopefully someone who uses contractors. =)

    Where can I find more information about FIG?

    Also, do you think a commercial line of credit would be useful at this stage for me, or do I need to have a bigger portfolio to worry about that?

    Thanks for your help!

    0Reply
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